Posted on 06/06/2009 11:48:52 AM PDT by moneyrunner
In 1962 GM had 464,000 workers and was paying benefits to 40,000 retired workers. There was one retiree for every 11.6 employees. The average age at death was 67. GM currently has 62,000 hourly workers and 29,000 salaried workers in the USA. Today GM also has 493,000 retired workers drawing benefits and the average age at death is 77. That is 5.4 retirees for every single active GM worker. Over 75% of the retirees were hourly workers. The average retiree receives $37,800 in payments annually plus medical benefits.
There is no possible way that a single employee can support 5.4 retirees in the manner they have become accustomed. This is why the UAW has already begun cutting benefits to current retirees as a result of the bailout deal. GM has transferred its liabilities to a trust and as part of the bailout the UAW gets a 17.5% ownership position in GM plus some other payments. When GM comes out of the bankruptcy they will no longer have this monster cash drain. Unfortunately retirees will be forced to live on drastically reduced income levels.
(Excerpt) Read more at moneyrunner.blogspot.com ...
IMO, your predictions are wrong.
Milton Friedman also said, “You cannot simultaneously have free immigration and a welfare state.” The entitlement programs are being impacted significantly by immigration, legal and illegal.
But this is easier to do, since most “premiums” are already deducted from SS checks, which is an easy way to “means test” Medicare by reducing SS benefits
LOL. That makes no sense at all.
You really are living in La La land if you think a higher payroll tax is a politically viable alternative.
It is MUCH easier, politically, to adjust a formula that nobody understands anyway (Including you?) as to the taxation of SS benefits.
So what if the payroll tax has not been raised for some time? If you think that taxes MUST be raised every few years, regardless of economic or political consequences, you are not in the real world -— and before long we will be at 80% total tax rates!
The REASON that I PREDICT that taxes on the SS benefit will be key to any political solution is obvious to most of us who study the issue very long:
Any “tax on benefits” will be partially “self correcting” -— reducing the strain on the system caused by COLA increases and reducing the strain on the system caused by those newly retired who begin to draw benefits.
You will be making the system itself a source of funds for the system.
Politically, the under 65 crowd will NOT be excited about paying more into the SS system when the Trumps and Gates of the world are still getting 15% of their benefits completely tax free.
“SOCIAL SECURITY IS BROKE”
“MEDICARE IS BROKE”
“Shouldn't we fix the programs we already have, before we stack even more debt on our kids and grand kids?”
“Shouldn't we make sure that Social Security and Medicare will be there, for our kids and grand kids, before we come up with another program that the government can not afford?”
“Shouldn't we make sure that China is willing to loan us the money for these new programs, before we spend all of this new money?”
Of course, when I said “we can not reduce benefits” -—
I clearly meant that we can not, politically, cut the benefit checks for those who are already retired.
As I indicated previously, Medicare Part B is means tested and the only entitlement program that links premiums to revenue. The prescription drug program, Part D, offers subsidies to people with low incomes as well.
Those are the facts.
The standard $96.00 Part B Premium is, roughly, 25% of the average Part B expense.
Part A is 100% taxpayer subsidized.
Part D is subsidized at about more than $30.00 per month, per person on Medicare Part D.
Your premiums, for Part D alone, are related to actual expenses -—
But even AFTER your contributions to all of your premiums, deductibles, co-pays or gap coverage -—
The taxpayers are paying, on average, $1,660.00 per month, for you and your wife, together!
Yes, you earned it.
However, such government expenditures should not be carried by the young families trying to make ends meet, who have trouble paying for their own health care expenses.
It would be far smarter for the politicians to use the tax code as a way to “means test” benefits for SS and for Medicare.
It is more poltically viable than taxing all SS benefits by removing the cap altogether. Small businesses, among others, will raise holy hell. FYI: AARP's solution: increasing the income cap to $150,000; increasing the payroll tax by 0.5 percent for both workers and employers, and changing the benefit formula to make the program more progressive. AARP has a huge membership base of 35 million, which makes it a big player in SS reform. I despise the group, which is forcing an enormous wealth transfer from the young to the old.
So what if the payroll tax has not been raised for some time? If you think that taxes MUST be raised every few years, regardless of economic or political consequences, you are not in the real world -— and before long we will be at 80% total tax rates!
Unlike you, I am against all tax increases to support this Ponzi scheme. Entitlements are consuming about half the federal budget and will rise to 71% by 2060 if nothing is done.
The REASON that I PREDICT that taxes on the SS benefit will be key to any political solution is obvious to most of us who study the issue very long:
I will compare my knowledge of the issue with yours anytime.
Any “tax on benefits” will be partially “self correcting” -— reducing the strain on the system caused by COLA increases and reducing the strain on the system caused by those newly retired who begin to draw benefits.
THE SYSTEM IS UNSUSTAINABLE THE WAY IT IS CURRENTLY STRUCTURED. IT IS A MATTER OF DEMOGRAPHICS. BY 2030, WE WILL HAVE JUST TWO WORKERS FOR EVERY RETIREE. AND BY 2030, ONE IN EVERY FIVE AMERICANS WILL BE 65 OR OLDER. YOU MUST EITHER INCREASE TAXES OR DECEREASE BENEFITS OR PROBABLY BOTH. FOR EXAMPLE, TAKING THE EARNINGS CAP OFF WILL JUST ADD A FEW YEARS TO THE SOLVENCY OF THE SYSTEM.
Politically, the under 65 crowd will NOT be excited about paying more into the SS system when the Trumps and Gates of the world are still getting 15% of their benefits completely tax free.
They should get excited about paying into a Ponzi scheme. Unfortuantely, the sheeple don't have a clue and will go along with what the elites tell them. The Dems love the entitlement programs because it makes more and more people dependent upon government.
You are mixing apples and oranges.
From what you just posted, you used “cap” and also “payroll” and then talk about taxation, but do not make clear that you are dealing with payroll taxes.
Lets try to be clear here.
I do think that the “cap” on the amount of earnings subject to SS taxation, for wage earners, will go up -— in fact I think that cap might be eliminated entirely!
As far as the taxation of benefits that are already being received, my math, above, though not all inclusive of all the details, clearly shows that it most middle class folks, on SS, are being taxed on 50% to 85% of their benefits NOW! The formula is simply awkward, and most people do not understand that they are being taxed on SS.
Actually, it gets worse than that. I am a retired USG employee. I retired at 56. My current pension is $104K and it goes up with the COLA increases. {This year there will probably not be one.} In addition, I carry USG health insurance to supplement Medicare. The USG supplements this insurance by approximately $800 a month. My total contributions to my USG pension amounted to $126,000. I have already received about six times what I put in. Is this a great country or what?
I also receive a small SS pension because I had a total of 40 quarters, which qualifies me for the minimum, which is also reduced because of my other pension. I have already received much more back than I ever contributed. And my spouse does not qualify herself for SS, but she gets SS as well.
However, such government expenditures should not be carried by the young families trying to make ends meet, who have trouble paying for their own health care expenses.
We have had the greatest wealth transfer in history, from young to old. The young don't seem to understand what is happening and the politicians will listen to the those who vote in the greatest numbers, the older citizens. Also, bear in mind that the 54 million or so SS recipients have relatives, i.e., sons, daughters, etc. who don't want the USG cutting back on benefits for their mothers, dads, and grandparents. Like any Ponzi scheme however, you can't continue the scam forever.
It would be far smarter for the politicians to use the tax code as a way to “means test” benefits for SS and for Medicare.
Good luck. They will look to the rich and corporations to fund these systems. And they will also cut down the second largest item in the federal budget, DOD, to fund the entitlement programs. In the not too distant future, we will have to make the same decisions Europe did between guns and butter. They chose butter and so will we.
The bottom line is this:
Every argument that you have used against my predictions can be used against YOUR proposals as well.
YES the programs are not sustainable.
They will NOT be cured by your suggested increase in the payroll tax percentage, either!
And, you DO support an increase in payroll taxes, so do not claim that I do and that you don’t.
Furthermore, you have said repeatedly that benefits must be reduced or revenues increased ——
A TAX INCREASE ON BENEFITS DOES BOTH!
The cap goes up every year. Contribution and Benefit Base. Obama has said that he wants to raise it immediately to around 200K to 250K. He has never said that he wanted to eliminate it altogether. I suggest you read the following to see why the cap will not be eliminated entirely. FYI: There is no cap on HI.
Removing Social Security's Tax Cap on Wages Would Do More Harm Than Good
As far as the taxation of benefits that are already being received, my math, above, though not all inclusive of all the details, clearly shows that it most middle class folks, on SS, are being taxed on 50% to 85% of their benefits NOW! The formula is simply awkward, and most people do not understand that they are being taxed on SS.
You do if you do your own tax return. Ignorance is bliss--for the politicians. Hell, most people believe that their SS contributions belong to them.
They will NOT be cured by your suggested increase in the payroll tax percentage, either!
I am not suggesting it, but many others are. I attended a week long seminar on SS sponsored by CATO a few years ago. We had everyone from the Concord Coalition, Heritage, OMB, CBO, two senators and four congressmen, a Nobel prize winning economist, David Walker, SS Trustees, etc. and there was some discussion about raising contributions, which is not new historically. When SS was started in 1937, the contribution rate was 1% each for employer and employee. Social Security & Medicare Tax Rates
And, you DO support an increase in payroll taxes, so do not claim that I do and that you don’t.
Can you cite where I said that? I am against this Ponzi scheme. I favor personal accounts and privatization. We can't tax our way out, just postpone the inevitable. And the more we delay solving the long term problem, the more drastic and draconian the solution. I have said this repeatedly on this thread.
A TAX INCREASE ON BENEFITS DOES BOTH!
A tax increase does not solve the problem.
After the crash of the financial markets, “privatization” is a dead letter. IT WON'T HAPPEN IN YOUR LIFETIME!
But, even if we were to go that privatization route, there is no way that we could quit paying benefits to those who are already drawing benefits.
Reduction in those benefits is also a non-starter.
TAXATION of those benefits is, politically, the path of least resistance.
There aren't enough benefits that can be taxed to fund the program. Most Americans have little or no savings. SS represents there major source of income.
For the lowest quartile of elders in the U.S., those with incomes of less than $9,390 in 2004, Social Security provided 86% of their total income on average. The second quartile, people with incomes from $9,390 to $15,199, depended on Social Security for 82% of their income. In the next highest quartile, those with incomes between $15,199 and $26,777, Social Security furnishes 58% of the income.
Only for the most affluent quarter of the post-65 population, people whose income exceeds $26,777 a year, does Social Security diminish as the mainstay of economic stability. For this group, earnings provide 35% of income, with Social Security contributing 21% and the rest coming from pensions and savings.
Among Americans 65 and older, total average income in 2004 was $23,878. But that figure is distorted by the wealth accumulated in the top quartile. The median income in 2004 was $15,199.
Your Obama like solution of taxing the rich and corporations doesn't work, because there are not enough "rich" people to support the system. And the million or more SS retirees entering this system annually are in much the same economic situation as those before them.
A greater percentage of future retirees is likely to have high incomes and substantial wealth than among current retirees, due to higher incomes and asset accumulation during their working years and continuing employment after age 65.
However, an analysis of projected retirement wealth among those aged 47-64 indicates that most retirees over the next 30 years will not be substantially better off than their parents.
It WILL happen.
I did not claim that raising the tax on benefits would solve the problem.
I did not claim that increasing the amount of wage earnings subject to the payroll tax would solve the problem.
I said it would happen, and it will happen.
One of the REASONS kicking this can down the road is necessary is this:
WE HAVE TO WAIT UNTIL ALL OF THE PEOPLE WHO THINK FDR AND LBJ ARE SAINTS, ARE DEAD!
Politically, the old guard Democrats want to blame the problems on thousands of other causes, rather than the fact that we are all living longer.
No one is suggesting that. There would be transition costs, but it would be like paying your mortgage off early. The USG has about a $13 trillion unfunded SS liability. If the USG got out of the pension business, it would no longer incur future liabilities. There are a number of ways to fund the transition costs.
There are many solutions out there. Here is one from CATO, but many of the think tanks have come up with solutions. The 6.2 Percent Solution: A Plan for Reforming Social Security
In many ways, SS is easier to solve than Medicare/Medicaid. David Walker called resolving SS a part of the "low hanging fruit" that government could solve more easily than the other entitlement programs.
YOU CLEARLY SUPPORTED AN INCREASE IN THE PAYROLL TAX PERCENTAGE, ABOVE!
You said, clearly, that an increase in the rate had not happened recently, had not happened since a certain date, and that such an increase in the payroll tax rate would be better than removing or raising the cap.
Now, I do think a total removal of the cap on earnings subject to the payroll tax would be stupid, economically.
There is great incentive for people to try and earn MORE than the “cap” today, since that gives them a bit of a “booster rocket” increase in take home pay.
The incentive to earn MORE than the cap amount helps more people REACH the cap, which means more revenue to the govt. However, there are not many supply siders or people who understand incentives, in Congress or the White House.
Obama will form a commission this year to study the subject as he promised during the campaign. I see nothing happening on the issue until after the 2010 mid-terms. The Dems will seek a bipartisan solution just like was done in 1983 between Tip O'Neil and Reagan. It remains to be seen if the GOP will show some courage and fight for a long term solution to the problem, e.g., personal accounts.
WE HAVE TO WAIT UNTIL ALL OF THE PEOPLE WHO THINK FDR AND LBJ ARE SAINTS, ARE DEAD!
ADD OBAMA TO THE LIST. IF WE HAVE TO WAIT THAT LONG, THE DEMS WIN. THE COUNTRY WILL BE TOO FAR DOWN THE ROAD TO SOCIALISM. NATIONALIZED HEALTH CARE WILL PUT THE FINAL NAIL IN THE COFFIN. YOU DON'T REVERSE GOVERNMENT ENTITLEMENT PROGRAMS EVEN IF THEY BANKRUPT THE COUNTRY.
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